C & K Coal Co. v. Taylor

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
1-25-1999
C & K Coal Co v. BRB
Precedential or Non-Precedential:
Docket 98-3151
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Filed January 25, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 98-3151
C & K COAL COMPANY,
Petitioner
v.
VIRGINIA TAYLOR, widow of William Taylor, LAMP COAL
COMPANY, OLD REPUBLIC INSURANCE COMPANY, and
DIRECTOR, OFFICE OF WORKERS' COMPENSATION
PROGRAMS, UNITED STATES DEPARTMENT OF LABOR,
ON APPEAL FROM A PETITION
FOR REVIEW OF A DECISION AND ORDER
OF THE BENEFITS REVIEW BOARD
DATED JANUARY 8, 1998
(BLA No. 95-1531)
Argued November 17, 1998
Before: McKEE, RENDELL, and WEIS, Circuit Judges.
Filed: January 25, 1999
Martha A. Zeigler Eberhardt,
Esquire (ARGUED)
John B. Bechtol, Esquire
Bechtol Lee & Eberhardt
The Ewart Building, 2nd Floor
925 Liberty Avenue
Pittsburgh, PA 15222
Attorney for Petitioner
Mark S. Flynn, Esquire (ARGUED)
Director, Office of Workers'
Compensation Programs
Marvin Krislov, Esquire
Deputy Solicitor for National
Operations
Allen H. Feldman, Esquire
Associate Solicitor for Special
Appellate and Supreme Court
Litigation
Nathaniel Spiller, Esquire
Deputy Associate Solicitor
United States Department of Labor
200 Constitution Avenue, N.W.
Room N-2700
Washington, D.C. 20210
Attorneys for Respondent Director,
Office of Workers' Compensation
Programs
Mark E. Solomons, Esquire
(ARGUED)
Laura Metcoff Klaus, Esquire
Arter & Hadden, LLP
Suite 400K
1801 K Street, N.W.
Washington, D.C. 20006
Attorneys for Respondents Lamp
Coal Company and Old Republic
Insurance Company
OPINION OF THE COURT
WEIS, Circuit Judge.
The issue in this Petition for Review is whether the
successor operator of a coal mine is responsible for
payment of Black Lung benefits to a long-time employee of
the mine who worked for the successor for only a few
months. We conclude that, under the Black Lung Benefits
2
Act and implementing regulations, the successor operator,
as opposed to the prior operator, is liable. We also decide
that, despite inexcusable and prolonged delay in the
administrative process, responsibility for payment should
not be shifted to the Black Lung Disability Trust Fund
under the circumstances presented here. Accordingly, we
will deny the Petition for Review.
By Friday, August 23, 1974, William Taylor had worked
as a coal miner for Lamp Coal Company ("Lamp") for
approximately twenty-seven years. On that day, Lamp
terminated all of its employees and sold its assets to
Cambria Coal Company, a subsidiary of C & K Coal
Company. Taylor returned to work the following Monday as
a supervisor for C & K and he worked in that position until
November 23, 1974 when he retired.
Taylor applied for Black Lung benefits in January 1975,
listing Lamp as his most recent employer. The Office of
Workers' Compensation Programs ("Office") preliminarily
approved the application effective January 1, 1975 and
notified Lamp that it was responsible for payment. Lamp
objected, informing the Office that it was not Taylor's most
recent employer.
Taylor's Social Security records confirmed that C & K was
his last employer but the Office, unaware of the sale and
potential successor liability, determined that C & K could
not be responsible because Taylor had not worked for that
employer for a year as required by regulation. Lamp then
formally controverted the claim.
In September 1977, having learned of the sale of assets,
the Office notified C & K that it was the responsible
operator. C & K then controverted the claim. In November
1977, the Office acknowledged the objection but informed C
& K of its right to have the miner examined and forwarded
a copy of the evidence file. In January 1978, after
development of additional uncertainty over the sale, the
claim was remanded to the Office at the Director's request
for a redetermination.
Pending designation of a responsible operator, Taylor
received benefits from the Black Lung Disability Trust
Fund. He died in May 1980, and his widow continued to
3
receive benefits from the Fund. One month after Taylor's
death, the Office again designated C & K as the responsible
operator. More questions arose, however, and after further
consideration, in 1981 the Office pointed back at Lamp.
This time, Lamp's insurer objected. Four more years passed
before the Office concluded in 1986 that C & K, as Lamp's
successor, was the responsible operator.
The matter was eventually assigned to an ALJ for a
hearing in 1988. Both operators were named and appeared
as potentially responsible parties. They convinced the ALJ
that the lengthy procedural delay had violated their
respective due process rights. The ALJ ultimately dismissed
both C & K and Lamp and assigned liability to the Trust
Fund.
The Director appealed to the Benefits Review Board. Five
years later, in February 1993, the Board reversed and
remanded to the ALJ with directions to consider both the
widow's entitlement and C & K's liability. On August 25,
1995, the ALJ awarded benefits to the widow and held C &
K responsible. The Board affirmed, both initially and upon
reconsideration. This petition for review followed.
We review this final order of the Board pursuant to 33
U.S.C. S 921(c), as incorporated into the Black Lung
Benefits Act, 30 U.S.C. S 932(a). Factual determinations by
the Board will be upheld if supported by substantial
evidence; questions of law receive plenary review. See 33
U.S.C. S 921(b)(3); Venicassa v. Consolidation Coal Co., 137
F.3d 197, 200 (3d Cir. 1998).
The widow's entitlement to benefits is not contested in
this petition. Rather, the only question is the source of
payment. C & K disputes its responsibility and contends
alternatively that the extended administrative delay violated
its due process rights.
I.
The Black Lung Benefits Act, 30 U.S.C. S 901 et seq.,
seeks to hold operators liable for the costs of
pneumoconiosis. Because miners often shifted between
employers and operators went out of business, became
4
insolvent or merged with others, industry realities
necessitated some complex rules for identifying a
responsible operator. The long latency period and
complications associated with pneumoconiosis posed
additional problems in terms of the equitable assignment of
responsibility. Anticipating situations in which it would be
impossible to trace or assess the responsible operator,
Congress established the Trust Fund. See 26 U.S.C. S 9501.
Financed by the coal industry, the Fund becomes a source
of benefit payments only when a responsible operator
cannot be identified, has gone out of business or is
financially incapable of assuming liability. See 26 U.S.C.
S 9501(d).
Liability generally attaches to the affected miner's most
recent employer. Foreseeing problems attendant upon the
transfer of mine ownership, however, Congress specified in
30 U.S.C. S 932(i)(1) that: "the operator of a coal mine who
. . . acquired such mine or substantially all the assets
thereof, from a . . . ``prior operator' . . . shall be liable for
. . . the payment of all benefits which would have been
payable by the prior operator . . . with respect to miners
previously employed by such prior operator as if the
acquisition had not occurred and the prior operator had
continued to be an operator of a coal mine." A more specific
provision, aimed directly at the sale of mining assets,
provides: "[i]f an operator ceases to exist by reason of a sale
of substantially all his or her assets . . . the successor
operator . . . shall be treated as the operator to whom this
section applies." See 30 U.S.C. S 932(i)(3)(D).
Pursuant to statutory direction, the Secretary of Labor
duly promulgated regulations to determine "whether
pneumoconiosis arose out of employment in a particular
coal mine or mines" and to identify the responsible
operator. See 30 U.S.C. S 932(h); 20 C.F.R. SS 725.490 -
725.493. The regulation at issue, 20 C.F.R. S 725.493,
designates as the responsible operator the employer with
which the miner has the most recent period of cumulative
employment of not less than one year. See 20 C.F.R.
S 725.493(a)(1); see also Appendix for text of 20 C.F.R.
S 725.493(a)(1), (a)(2)(i), (a)(2)(ii), (a)(4).
5
Echoing the Act, however, the paragraph immediately
following provides that the successor operator "shall be
liable for . . . benefits which would have been payable by
the prior operator with respect to miners previously
employed by such prior operator as if the acquisition had
not occurred and the prior operator had continued to be a
coal mine operator." See 20 C.F.R. S 725.493(a)(2)(i); see
also 30 U.S.C. S 932(i)(1). The one-year minimum
employment rule is expressly made "[s]ubject to" the
provisions of this paragraph. See 20 C.F.R. S 725.493(a)(1)
("Subject to the provisions of paragraph[ ] (a)(2)"). Moreover,
as the more specific provision, paragraph (a)(2), by its
placement and content, operates as an exception to the
one-year minimum employment rule. Thus, the successor
situation, expressly covered by paragraph (a)(2)(i), is not
governed by the rule set forth in paragraph (a)(1), i.e., the
minimum employment rule.
In addition to these specific successor operator rules, the
Act and regulations establish a framework for determining
which, as between the prior and successor operator, is
"primarily liable" for the payment of benefits. See 30 U.S.C.
S 932(i)(2); 20 C.F.R. S 725.493(a)(2)(ii). Noting that
Congress sought to prevent an operator from circumventing
responsibility by entering into corporate or other business
transactions which "make the assessment of liability
against that operator a financial or legal impossibility,"
subsection (a)(2)(ii) of the regulation provides that a "prior
operator . . . shall remain primarily liable for the payment
of benefits under this part predicated on employment with
the prior operator" if it is able to assume financial
responsibility through insurance or otherwise. See 20
C.F.R. S 725.493(a)(2)(ii); see also 30 U.S.C. S 932(i)(2).
Applying these statutory and regulatory provisions, we
must determine whether Lamp, as the prior operator, or C
& K, as the successor operator, is responsible. The
Director, seeking to uphold assignment of liability to C & K,
contends that under the regulations, because it employed
Taylor, albeit for less than a year, C & K is primarily liable
as the successor. Lamp, in agreement with the Director,
maintains that employment by a successor operator
overrides application of the one-year minimum employment
6
rule. Old Republic, Lamp's insurer, adopts its insured's
interpretation of the regulation.
C & K attacks the ALJ finding that Lamp ceased doing
business upon sale of its assets and, on that basis, argues
that Lamp remains primarily liable. In addition, C & K
contends that even if it is a successor, it is not responsible
because it employed Taylor for less than one year. Finally,
should we agree that it is responsible, C & K asserts that
Lamp had agreed to indemnify it against any claims
existing at the time of the sale.
We are persuaded that the Director's position is correct.
In looking first, of course, to the statute, we observe that
the Act clearly specifies that the successor operator is
responsible for benefits which "would have been payable"
by the prior operator for miners previously employed by the
prior operator as if the prior operator had continued to
operate the mine. See 30 U.S.C. S 932(i)(1). There is no
dispute that Taylor previously worked for Lamp and was
later employed by C & K following the change of ownership.
Section 932(i)(1), read in isolation, unmistakably
contemplates assigning responsibility to C & K.
The paragraph immediately following, however,
complicates matters because it states that "nothing in
[subsection 932(i)] shall relieve any prior operator of any
liability under this section." See 30 U.S.C. S 932(i)(2).
Together, these provisions of the Act might be read to pose
a contradiction between assigning liability to the successor
under (i)(1), yet specifically retaining liability in the prior
operator under (i)(2).
The Secretary's regulation, however, eliminates any
apparent inconsistency. Under 20 C.F.R. S 725.493(a)(2)(ii),
the successor becomes responsible for miners previously
employed by the prior operator once they are hired by the
successor following the change in ownership. If, however,
the miner did not work for the successor, the prior operator
remains primarily liable. In that situation, primary liability
only shifts to the successor if the prior operator is
financially incapable of assuming payments. See 20 C.F.R.
S 725.493(a)(2)(ii).
7
Translated into the circumstances of this case, because
Taylor worked for Lamp and continued to work in the mine
after C & K's subsidiary took it over, C & K becomes
primarily liable. In other words, once C & K purchased
Lamp's assets, thereby becoming Lamp's successor, it was
as if Taylor had worked for C & K twenty-seven years and
three months. Only if C & K could not otherwise assume
liability would Lamp remain primarily liable. See 20 C.F.R.
S 725.493(a)(2)(iii).
That Taylor worked for C & K for less than a year does
not alter the outcome. The regulation's one-year minimum
employment rule is specifically made subject to the special
rule for successors. See 20 C.F.R. S 725.493(a)(1), (a)(2)(i).
Moreover, the one-year rule is not contained in the Act,
which, to the contrary, dictates a special rule for
successors. See 30 U.S.C. S 932(i)(1), (i)(3)(D). We agree with
the Director's interpretation of the regulation, one that does
not conflict with the Act, and therefore hold that C & K is
primarily liable.
We reject, as based on an erroneous reading of the Act,
C & K's argument that if indeed Lamp continued as a viable
entity following the sale of substantially all of its mining
assets, Lamp remains primarily liable. Neither the basic
successor rule, 30 U.S.C. S 932(i)(1), nor its more specific
formulation, 30 U.S.C. S 932(i)(3)(D), require total cessation
of the prior operator's business before the successor
becomes potentially liable. In this situation, both operators
were potentially liable; the question was whether there
existed any basis for assigning primary liability to C & K.
We must also deny C & K's plea to apportion liability. We
do this despite the intrinsic appeal of allocating liability to
reflect the fact that Taylor had worked for Lamp for 27
years and for C & K only three months.
The Act authorized the Secretary to "establish[by
regulation] standards for apportioning liability for benefits."
30 U.S.C. S 932(h). The Secretary proposed an
apportionment-based regulation in 1972, but withdrew it
amidst adverse comment. See 37 Fed. Reg. 18,167-68
(Sept. 7, 1972). Apportionment would have introduced a
substantial degree of complexity and it appeared that fixed
8
guidelines would better serve the mining industry. We note
a ready analogy in the commercial field where it is
recognized that arbitrary rules known in advance, even if
inequitable in some specific instances, are on the whole
necessary for the efficient conduct of business. Accordingly,
in the absence of a regulation permitting apportionment,
C & K must bear the full burden of payment.
II.
Should it be the responsible operator, C & K argues
vigorously that the administrative delay has denied it due
process. The remedy, C & K urges, is a total transfer of
liability to the Trust Fund.
It appears that the Office was aware as early as 1977 of
the uncertainty surrounding the responsible operator issue.
As noted earlier, however, eleven years of wrangling passed
before all potential parties appeared before an ALJ for a
basic evidentiary hearing.
In one of the appeals to the Board, the Director did not
file his brief for two years beyond the time set by the
Board's rules. See 20 C.F.R. SS 802.210-802.217. In a
subsequent appeal, the Director was again delinquent and
again the Board did not enforce its rules. The Board's
ultimate decision, upon reconsideration, to affirm was not
docketed until January 8, 1998.
Thus, more than 23 years elapsed from the initial
application to the date of the responsible operator
determination. Fortunately for the Taylors, interim
payments have been made from the Trust Fund.
Although we recognize that inadequate information
initially hampered the Office's ability to grasp the
relationship among Taylor, Lamp and C & K, we are
appalled that this relatively straightforward issue bounced
three times between the Office and an ALJ, accompanied by
unnecessary delays. Similarly, we cannot ignore that the
Board compounded the delay by permitting the Director to
flout its rules that set time limits for filing briefs.
Unfortunately, as we have observed in the past, such
"dismaying inefficiency" has long characterized the
9
administration of this Act. See, e.g. , Venicassa, 137 F.3d at198 & n.2 (12 years delay compounded by error of the
Office); Lango v. Director, OWCP, 104 F.2d 573 (3d Cir.
1997) (benefits awarded after 14 years); see also Amax Coal
Co. v. Franklin, 957 F.2d 355, 356 (7th Cir. 1992) ("As so
often in black lung cases, the processing of th[is] claim has
been protracted scandalously . . . ."). We publicized our
dismay in Lango, hoping to bring the Act's poor
administration "to the attention of authorities who can do
something about it." 104 F.3d at 576.
The tortured route that this matter took towards
resolution simply cannot be justified. Counsel for the
current Director, with admirable candor, did not try to do
so at oral argument. Rather, he assured us that steps have
been taken in the last few years to ensure that Black Lung
claims are expeditiously resolved. Statistics reveal that the
number and age of pending Black Lung cases has, indeed,
steadily decreased. We cannot hope but that this trend
continues. Recent progress, however, is of little consolation
to C & K and we must consider its due process challenge
under the deplorable circumstances here.
In large part, we view the proposed remedy for the
asserted due process challenge violation through our
perception of the Trust Fund's purpose and nature.
Congress intended operators to bear the costs of
pneumoconiosis whenever feasible. See S. Rep. No. 95-209,
at 9 (1977), reprinted in House Comm. on Educ. and Labor,
96th Cong., Black Lung Benefits Reform Act and Black
Lung Benefits Revenue Act of 1977, 612 (Comm. Print
1979); see also Director, OWCP v. Oglebay Norton Co., 877
F.2d 1300, 1304-05 (6th Cir. 1989). The Trust Fund exists
as a fail-safe mechanism and it is not a creature of the
Department of Labor, the Office or the Board. See 26 U.S.C.
S 9501.
Given the dismal history of the Act's administration, it is
not hard to envision how quickly a policy of liberal transfer
of claims to the Fund would deplete its resources. Such a
remedy, it is generally held, should only be invoked where
prejudice other than mere delay has been demonstrated.
For example, in Venicassa, we found that the claimant,
forced to litigate his entitlement to benefits twice, had been
10
prejudiced by the ten-year delay and improper designation
of the responsible operator. See 137 F.3d at 202-03. In
those circumstances, rather than allow the litigation to
drag on, we concluded that the Trust Fund should assume
liability. See id. at 203-04.
In Lane Hollow Coal Co. v. Director, OWCP, 137 F.3d 799(4th Cir. 1998), the alleged responsible operator was
notified 17 years after notice could have been given and
three years after the claimant died. The Court of Appeals
for the Fourth Circuit concluded that because the
inexcusable delay resulted in the loss of an opportunity to
mount a proper defense, the operator had been denied due
process. See id. at 808. In light of the substantial prejudice
shown, payments were assigned to the Trust Fund. See id.Oglebay dealt with a similar delay for which an ALJ had
seen fit to transfer liability to the Trust Fund. See 877 F.2d
at 1302. The Court of Appeals for the Sixth Circuit
disagreed with that drastic approach, because "none of the
parties . . . would suffer substantial prejudice by a further
remand." Id. at 1304. The claimant had been receiving
interim benefits from the Trust Fund and the operator had
access to substantial medical evidence sufficient to provide
an adequate defense on remand. See id. Oglebay simply did
not involve prejudice comparable to that encountered in
Venicassa and Lane Hollow.
The case before us is similar to Oglebay. C & K was
notified in 1977 that its status as a responsible operator
was under consideration. Thus, it had three years to
procure appropriate medical evidence before Taylor died.
On this record, we see no prejudice other than that
attendant on the failure to confirm the liability that had
been asserted years earlier. C & K makes some vague
reference to harm in connection with contractual rights it
may have had to indemnification from Lamp, but, as that
position is not clearly articulated, we do not find it
persuasive.
Accordingly, we will not hold that this delay, albeit
inexcusable, ipso facto establishes a violation of C & K's
due process rights. The fact that the delay cannot be
attributed to the Trust Fund is an important additional
11
factor. Foisting liability on the Trust Fund where no
demonstrable prejudice has occurred would run counter to
Congressional intent by effectively shifting responsibility for
the Office's and the Board's failings onto contributing
operators. We will not take that action when there is an
operator legally responsible and financially capable of
assuming payments.
We conclude that C & K is the legally responsible
operator and that, while the delay present in this case
cannot be condoned, neither its occurrence nor its
consequences should be visited upon an innocent party,
the Trust Fund.
Accordingly, the petition for review will be denied.
APPENDIX
20 C.F.R. S 725.493 (1998). Criteria for identifying a
responsible operator.
(a)(1) Subject to the provisions of paragraphs (a)(2) and
(3) of this section, and provided that the conditions of
S 725.492(a)(2) through (a)(4) are met, the operator or other
employer with which the miner had the most recent periods
of cumulative employment of not less than 1 year, as
determined in accordance with paragraph (b) of this
section, shall be the responsible operator.
(2)(i) Except as otherwise provided in this paragraph, if
the operator described in paragraph (a)(1) of this section
was an operator of a mine or mines or the owner of the
assets thereof on or after January 1, 1970, (a "prior
operator") and on or after January 1, 1970, transferred
such mine or mines or substantially all of the assets thereof
to another operator (a "successor operator"), such
successor operator shall be liable for and shall secure the
payment of all benefits which would have been payable by
the prior operator with respect to miners previously
employed by such prior operator as if the acquisition had
not occurred and the prior operator had continued to be a
coal mine operator. A lessor of a coal mine may be
considered a prior or successor operator in accordance with
this subpart.
12
(ii) The stated congressional objective supporting section
422(i) of the Act is to prevent a coal operator from
circumventing liability under this part by entering into
corporate or other business transactions which make the
assessment of liability against that operator afinancial or
legal impossibility. Accordingly, a prior operator under
paragraph (a)(2)(i) of this section, which transfers a mine or
mines or substantially all the assets thereof, shall remain
primarily liable for the payment of benefits under this part
predicated on employment with the prior operator if such
prior operator meets the conditions of S 725.492(a)(2) and
(a)(4). If the conditions in S 725.492(a)(2) and (a)(4) are not
met, the successor operator shall, if appropriate, be liable
for the payment of such benefits.
. . . .
(4) If there is no operator which meets the conditions of
paragraphs (a)(1) or (2) of this section, the responsible
operator shall be considered to be the operator with which
the miner had the latest periods of cumulative employment
of not less than 1 year, subject to the provisions of
paragraph (a)(2) of this section and provided that the
conditions of S 725.492(a)(2)-(a)(4) are met.
. . . .
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
13